2.4 million ‘at-risk’ borrowers a big concern

Research highlights challenges for individuals with debts exceeding B1 million

Borrowers with debts exceeding 1 million baht each represent the greatest concern for the country as household debt accumulates, a new survey shows.

This at-risk segment amounts to 2.4 million borrowers, according to the Puey Ungphakorn Institute for Economic Research (PIER).

Data from the National Credit Bureau reveals there are 25.2 million individual borrowers in Thailand, comprising 38% of the population. The average debt per borrower is 540,000 baht.

Borrowers are categorised into six groups: healthy, overleveraged, at risk, constrained debt, non-performing loans (NPLs) and constrained NPLs.

Retail borrowers classified as at risk carry an average debt of 1.12 million baht each, the highest among the six borrower groups.

“At-risk borrowers are the most concerning group because of their sheer number and reduced capacity to repay debts, increasing the likelihood they will become persistent debtors,” said Sommarat Chantarat, the PIER executive director, said at the Bank of Thailand 2024 Symposium last week.

Most of these borrowers are younger individuals, aged 25-35, earning lower incomes and living in rural areas.

As for the other groups, healthy borrowers total 4.7 million with average outstanding loans of 450,000 baht. The overleveraged group totals 3.8 million borrowers with average outstanding loans of 280,000 baht each.

Constrained borrowers number 4.8 million with an average debt of 790,000 baht, while NPL borrowers total 300,000 with an average of 680,000 baht each.

Finally, constrained NPL borrowers make up 3.1 million people with an average debt of 540,000 baht.

Household debt in Thailand exceeds 16 trillion baht, or more than 90% of gross domestic product, well above the average for many developing country peers.

PIER also surveyed the debt repayment behaviour of retail borrowers over the past year. The findings showed principal repayments, particularly for term loans, declined only slightly, as borrowers’ debt loads exceed their repayment capacity.

The survey found 46% of borrowers carry more debt than they can service, reflecting that Thailand’s household debt is heavily concentrated among low-income earners.

Ms Sommarat said addressing household debt requires collaboration from all stakeholders, including borrowers, financial institutions, regulators and the government. Solutions must balance short- and long-term benefits with potential risks, she said.

She warned that some debt-relief schemes, such as long-term agricultural debt moratoriums, could increase risks to the economy by eroding financial discipline.

According to PIER research, if a moratorium is offered for too long without encouraging financial discipline, 60% of participants are more likely to remain long-term borrowers, and 45% may default.

Some debt relief schemes could pose long-term risks to the economy, according to the researcher.